Department of Health and Human Services
Departmental Appeals Board
AFDC QUALITY CONTROL REVIEW PANEL
SUBJECT: Wisconsin Department
of Health and Social Services
Docket No. A-94-34
Decision No. QC62
DATE: March 21, 1994
DECISION
The Wisconsin Department of Health and Social Services
(Wisconsin)
appealed a November 2, 1993 quality control
(QC) determination by the
Regional Administrator of the
Administration for Children and Families
(ACF). ACF
determined that Wisconsin's state QC review had erred in
finding that the amount of B.Y.'s Aid to Families with
Dependent
Children (AFDC) grant was correct. 1/ ACF
determined that
there was an overpayment of $40 in B.Y.'s
AFDC grant in the review month of
August 1992 since all
of her child care costs for August were not paid in
that
budget month.
For the reasons discussed below, we sustain ACF's
determination that the
Wisconsin QC review erred in
finding that the amount of B.Y.'s AFDC grant
was correct.
Applicable Authority
Section 408(a) of the Social Security Act (Act) provides:
In General.--In order to improve the accuracy of
payments of
[AFDC], the Secretary shall establish
and operate a quality control system
under which the
Secretary shall determine, with respect to each
State,
the amount (if any) of the disallowance
required to be repaid to the
Secretary due to
erroneous payments made by the State in carrying out
the State plan approved under this part.
Further, the Act requires each state to review a sample
of cases in
which AFDC payments were made during the
review period in order to determine
the level of
erroneous payments. The Act then provides that the
Secretary shall review a subsample of the cases reviewed
by a state, and
notify the state of any case in the
subsample which the Secretary finds
involves an erroneous
payment. See section 408(b)(1)(A) of the
Act.
Section 402(a)(7)(A) of the Act requires a state agency,
in determining need, to take into consideration any
income and resources
of any child or relative receiving
AFDC payments. Further, 45 Code of
Federal Regulations
(C.F.R.) � 233.20(a)(3)(ii) provides that all income and
resources, after all policies governing the reserves and
allowances and
disregard or setting aside of income and
resources have been uniformly
applied, shall be
considered in determining need and the amount of
assistance payment. 2/ Among the specific disregards
listed, the regulations provide that child care costs up
to a certain
amount must be disregarded for purposes of
AFDC eligibility. 45 C.F.R.
� 233.20(a)(11)(i)(C).
The regulations additionally provide --
The State agency shall operate the quality control
system in
accordance with policies and procedures
prescribed in the Quality Control
Manuals issued by
the Department [of Health and Human Services].
45 C.F.R. � 205.40(b)(1).
Concerning the regulatory mandate for disregarding child
care costs, the
Quality Control Manual (QCM) provides --
After applying all of the other earned income
disregards, the State
must apply a disregard for the
cost of care for each dependent child or
incapacitated adult who is receiving AFDC. For
individuals
employed full-time, the State must
disregard the actual cost up to $175 per
month per
dependent ($200 for children under two). For
individuals
employed less than full-time, or not
employed throughout the month, a State
may apply a
disregard for actual cost up to an amount less than
the
disregard limits of $175 and $200 per dependent,
in which case, a procedure
must be in place for
determining and applying the disregard.
The dependent care disregard is applied to income
when the expense
is paid, except when income is
prorated under [permissible state practice
(PSP)].
When income is prorated, dependent care expenses are
allowed as incurred.
QCM � 3556.D.1. 3/ (emphasis added).
Factual Background
B.Y. incurred child care costs of $92.50 in August 1992.
B.Y. paid
the child care provider $52.50 in August, but
did not pay the remaining $40
until September 1, 1992.
In determining B.Y.'s AFDC payment for August, the
Wisconsin QC review
disregarded the total child care
costs of $92.50.
In its determination that the Wisconsin QC review had
erred, ACF found
that B.Y.'s AFDC grant was overpaid $40
in August 1992 because only $52.50
was paid in the budget
month, with the other $40 being paid in the following
month. Citing section 3556.D of the QCM, ACF stated that
the
dependent care disregard is applied to income only
when the expense is paid,
unless the income is prorated
under Wisconsin's PSP. Since Wisconsin's
PSP does not
allow proration on income, ACF concluded that the child
care expense is applied when it is paid and not when it
is incurred.
Analysis
Wisconsin argued that 45 C.F.R. � 233.20(a)(11)(i)(C),
the regulation
providing for the disregard of child care
costs, does not specify that such
costs must be deducted
only in the month in which they are paid.
Wisconsin
contended that B.Y.'s record shows a consistent history
of two
payments each month to the child care provider.
Wisconsin insisted
that the county agency documented and
verified B.Y.'s child care costs and
B.Y. diligently
reported those costs. Wisconsin argued that there was
no
question that B.Y. incurred child care costs of $92.50 in
August,
that B.Y. promptly paid those costs, that those
costs were reported
appropriately, and that no public
funds were improperly expended in this
case.
Wisconsin also questioned ACF's reliance on the QCM as
the authority for
its finding that an error occurred in
B.Y.'s case. Wisconsin argued
that, since 45 C.F.R. �
205.40(b)(1) enumerates five areas in which a state
specifically must apply the QCM, the state need not
follow the
procedures and policies set forth in the QCM
in other areas.
4/ Further, Wisconsin argued that the
QCM provisions on applying the
child care disregard were
inconsistent with the regulations since 45 C.F.R.
�
233.20(a)(11)(i)(C) does not specify that the child care
payment must
be made during the budget month.
While Wisconsin is correct that 45 C.F.R. � 205.40(b)(1)
does mention
specific areas where the QCM's policies are
to be followed, we are not
prepared to read the
regulation as narrowly as Wisconsin argued. The
regulation also broadly states that a State agency shall
operate its
quality control system according to the
policies and procedures prescribed
in the QCM. There is
no stated limitation in the regulation, however,
that the
procedures of the QCM in other areas are not to be
followed.
An examination of the development of 45 C.F.R. �
205.40(b)(1) supports
this view. When the regulation was
first proposed in December 1976, it
instructed the State
agency to follow the five specific directives now
contained at subsections (i) through (v), but made no
mention of the
QCM. 41 Fed. Reg. 55,727 (December 12,
1976). When the
regulation was officially promulgated,
however, the preamble noted that
commentators made
objections to the lack of specificity in the proposed
regulation, and the commentators suggested that the QC
Manuals which
detail the procedures for QC reviews be
incorporated into the
regulations. 42 Fed. Reg. 37,205,
at 37,206 (July 20, 1977). In
response to these
comments, the preamble declared:
The procedures set forth in the QC Manuals are
specifically
incorporated by reference into the
final regulations.
Id. Thus, it is clear that it was the Department's
intent that
states be required to adhere to all the
policies set forth in the QCM.
Furthermore, the policy in the QCM applying the dependent
care disregard
"when the expense is paid" is not
inconsistent with the regulation.
The regulation
requires (in relevant part) disregard of the "actual cost
. . . not to exceed $175" of dependent care expenses.
The QCM
policy represents a reasonable interpretation of
the "actual cost" language
in calculating a payment which
must reflect monthly income and need
determination.
Accordingly, there is no conflict between the
requirements of � 3556.D.1 of the QCM and 45 C.F.R. �
233.20(a)(11)(i)(C).
Moreover, there is a reasonable basis for the QCM
provision limiting the
amount of the disregard for child
care costs to the amount of such costs
actually paid in a
month. If, as Wisconsin contended, the amount of
the
child care disregard were not to be determined when the
costs were
paid, it would be possible for an AFDC
recipient to manipulate the system so
as to exceed the
regulatory limit on the amount of allowable child care
costs. An AFDC recipient could incur child care costs in
excess of
$175 for one child in a month, but have the
total amount of the costs
disregarded by deferring
payment of some of the costs to the next month.
Conclusion
For the reasons discussed above, we conclude that ACF
correctly
determined that the Wisconsin QC review erred
in not finding a $40
overpayment in B.Y.'s AFDC grant for
August 1992.
__________________________
Peggy McFadden-Elmore
__________________________
Leslie Sussan
__________________________
Thomas D. Horvath
* * * Footnotes * * *
1. In order to protect her
privacy, this AFDC
recipient is identified by her initials. The
Wisconsin
QC review number is 112061.
2. All citations in this decision to the
regulations will
refer to the 1991 C.F.R.
3.
During the period at issue, August 1992, this
section appeared at � 3555.D.1
of the QCM.
4. The State
agency is required to: 1) apply the
prescribed sampling, methods, and
schedules; 2) conduct
field investigations; 3) provide the resources and
methods necessary to analyze the findings of the system;
4) take
appropriate corrective action on improperly
authorized or denied assistance;
and 5) assure access by
Department of Health and Human Services staff to
State
and local records relating to public assistance. 45
C.F.R. �
205.40(b)(1)(i) - (v). Wisconsin asserted that
it did comply with the
QCM in those five areas.